YRC Worldwide posts $309M 2Q loss, updates status

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YRC Worldwide Inc. on Thursday, July 30, reported its results for the second quarter and provided an update on its comprehensive plan. For the quarter, the company posted a loss of $309 million, or $5.20 per share, compared with a profit of $35.8 million, or 62 cents per share, a year ago. Excluding several one-time charges, YRC’s loss would have been $3.53 per share. Revenue declined 45 percent to $1.33 billion from $2.4 billion.

“The second quarter was focused on executing our comprehensive plan to realize efficiencies from the YRC integration, restore financial strength and position our operating companies for future success,” said Bill Zollars, chairman, president and chief executive officer of YRC Worldwide, based in Overland Park, Kan. “As a result of the March integration of Yellow and Roadway, the further rightsizing of our networks in relation to volumes and the overall economic environment, we recorded some significant charges that we believe are not reflective of the underlying operating results of our company. Although we will continue to enhance the efficiencies of our networks, we do not expect to record charges of this magnitude going forward.”

The company said the significant second-quarter charges included workers’ compensation accrual adjustments, rerate adjustments, bad debt and other reserve accruals, integration impact, reorganization costs and gains on property disposals, equity investment impairment and union employee stock awards.

YRC Worldwide also reported aggregated cash and available unused capacity under the credit facilities of $218 million at June 30, including $165 million of cash and cash equivalents. In addition, the company said it had $95 million in the revolver reserve created pursuant to the company’s credit agreement at June 30. The company said it completed $127 million of sale and financing leaseback transactions and closed on $14 million of excess properties during the second quarter.

The company said the equity investment impairment of $30 million noted in the significant charges table related entirely to the company’s August 2008 65 percent investment in Shanghai Jiayu Logistics, one of the largest providers of truckload and less-than-truckload ground transportation services in China. The company said this write-down was primarily a result of the declining economy in China and around the world.

Key segment information for the second quarter 2009 compared to the second quarter 2008 included:

  • YRC National Transportation total shipments per day down 37.1 percent and total tonnage per day down 39.4 percent. The company continues to right-size its network to support current and future shipment volumes. Total revenue per hundredweight, including fuel surcharge, down 13.1 percent, when adjusting for rerates of $12 million not attributed to the second-quarter revenue, and down 14.2 percent without adjusting for these items. Excluding fuel surcharge and adjusted for $12 million in rerates, and mix, total revenue per hundredweight for YRC National Transportation was down about 1.5 percent; and
  • YRC Regional Transportation total shipments per day down 22.0 percent and total tonnage per day down 26.4 percent. Total revenue per hundredweight, including fuel surcharge, down 11.9 percent. Excluding fuel surcharge, total revenue per hundredweight for YRC Regional Transportation was down about one percent.
  • “We continue to win new business, and customers have returned shipments to our networks, though it has not happened as quickly or at the levels we were initially expecting,” Zollars said. “Although misinformation about our financial stability creates noise in the marketplace, many of our key customers stand firmly behind our plans and show their support with their business every day. We believe that as we continue to make significant progress on our plans, the tremendous support of our employees, lenders and other stakeholders can provide all of our customers with the confidence they need to completely return.”

    YRC Worldwide also announced additional progress in its comprehensive plan to realize efficiencies from the YRC integration, restore financial strength and position its operating companies for future success. The company said the progress report includes updates on subsequent events since the close of the June 30 reporting period, and that these events focus on three key areas of its comprehensive plan:

  • Bank amendment: The company on Thursday, July 30, finalized an amendment to its credit agreement with its lender group. The amendment eliminates the third-quarter 2009 earnings before interest, taxes, depreciation and amortization (EBITDA) covenant and establishes a fourth-quarter 2009 EBITDA covenant of $15 million and a first-quarter 2010 EBITDA covenant of $20 million. Also, under the amendment, the company can retain 100 percent of asset sales between July 31, 2009 and Aug. 31, 2009, up to $50 million (subject to certain conditions), and the minimum liquidity covenant during that same period has been eliminated. The company and its lenders continue active dialogue in regard to the company’s progress on its strategic actions and will evaluate the need for longer-term modifications to the credit agreement.
  • “We have continued to receive support from our lenders as we manage through this severe economic downturn and the implementation of our recovery plan,” said Tim Wicks, executive vice president and chief financial officer of YRC Worldwide. “We believe their actions demonstrate their belief in the value of this company and its potential as the benefits of our strategic plans become more reflective in our results.”

  • Pension fund progress: YRC Worldwide has reached agreement with the company’s International Brotherhood of Teamsters multiemployer defined benefit pension funds to provide certain of the company’s real estate as collateral in lieu of pension contribution payments during the second quarter. The company previously announced that it had finalized agreements with funds totaling $94 million, and the remaining funds have joined as participants in the same agreement for a total deferral of $128 million.
  • Teamsters voting on contract modifications: The company’s employees represented by IBT currently are voting on modifying the company’s labor agreement, and the results of the vote are expected in early August. Upon ratification of the modification, the company expects an immediate benefit to monthly operating income and cash flow of about $45 million per month, increasing to $50 million per month in 2010.
  • The company said it expects gross capital expenditures of about $65 million in 2009 and more than $100 million of cash proceeds from sales of excess properties. Sale and financing leaseback transactions are expected to generate more than $300 million of cash proceeds in 2009, and excluding payments related to sale and financing leaseback transactions, the company also expects interest expense of about $35 million to $40 million in the third quarter of 2009.

    “We have seen signs of encouragement in the economy, including stabilization in our absolute volumes, though we think it is too early to confirm that this is the bottom of the recession,” Zollars said. “We remain optimistic that economic improvement could happen earlier than expected, but we do not have it reflected in our financial plans until we progress through 2010.”